Verizon: OTT on Tap as Yahoo Deal Nears Close
With Verizon's $4.5 billion acquisition of Yahoo now set to close on June 13, the telco is doubling down on its strategy to become a major global media company. The tenets of that strategy include a broad push into the ad tech industry and an expansion of Verizon's direct-to-consumer video business.
On the latter front, not only has Verizon Communications Inc. (NYSE: VZ) begun testing an upgraded, IP-based version of Fios TV, but EVP and President of Media and Telematics Marni Walden reiterated at the Guggenheim Media Day event that the company plans to launch a new over-the-top video service once the Yahoo assets are folded into its product portfolio. Chairman and CEO Lowell McAdam discussed Verizon's OTT plans last month at another investor conference. Walden expanded on McAdam's remarks, suggesting that a launch date isn't "way, way off in the distant future" and adding a bit more color around the company's approach to content.
"Just having a lot of content isn't a winning strategy," said Walden, noting that quality of content is more important than quantity, while also suggesting that honing in on certain types of content, including original programming and sports, is critical.
"We're not looking for the kitchen sink on this one," she added.
The promise of another OTT video service puts Verizon in the competitive company of AT&T Inc. (NYSE: T), Dish Network LLC (Nasdaq: DISH), Hulu LLC , Netflix Inc. (Nasdaq: NFLX) and many others. With such a crowded field, it will be hard for the telco to stand out even with a compelling content bundle. However, the theory is that Verizon will be able to differentiate itself by combining new consumer video services with advances in advertising technology. In addition to acquiring Yahoo, Verizon scooped up AOL in 2015 for $4.4 billion, and it now plans to combine both assets into a new business unit called Oath with a focus on digital advertising.
Verizon's media plans look good on paper, but the company's track record is less than stellar. The network operator has struggled to launch an IP-powered upgrade to its Fios TV service, and its Go90 mobile video app is widely considered a flop. (See Verizon Beta Tests IPTV, Stays Mum on Launch and Verizon Backpedals on Go90.)
Additionally, while Verizon has brought significant advertising expertise and new ad platforms in house, it has to fight against the twin Goliaths of Facebook and Google (Nasdaq: GOOG) for advertising dollars. The company believes it can do so by leveraging its access to audiences across a wide array of platforms, but that hypothesis is yet to be proven.
Verizon also has the messiness of integrating Yahoo to contend with in the short term. There are numerous reports that the integration will include layoffs, with TechCrunch saying that as many as 2,100 jobs will be lost.
The company itself didn't directly confirm those layoffs to Light Reading, but a spokesperson did share the following statement: "Oath's strategy is to lead the global brand space. With access to over 1B consumers upon close, we will be positioned to drive one of the most important platforms in the consumer brand space. Consistent with what we have said since the deal was announced, we will be aligning our global organization to the strategy."
Regardless of how the personnel issues shake out, Verizon still has a lot of work to do before it can claim the mantle of media powerhouse. Acquiring Yahoo is only one potential step in that direction.
— Mari Silbey, Senior Editor, Cable/Video, Light Reading